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WORKSHOP ON BUSINESS MODELS FOR DIGITALIZATION
Vinit Parida, David Sjödin, Mats Pettersson, and Mikael Miglis Luleå University of Technology, Ericsson and ABB
AGENDA FOR THE DAY 14:30 –15:10 Research presentation DigIn Project- Digital Innovation of
Business Models
15:10-15:40 Industry presentations from Ericsson and ABB
15:40 –16:20 Workshop about how to profit from digital business models
16:20-16:30 Key take away and conclusion
DIGITAL BUSINESS MODEL INNOVATION IN THE SWEDISH INDUSTRIAL ECOSYSTEM
OPPORTUNITIES, CHALLENGES AND LESSON LEARNED
Vinit Parida and David Sjödin Entrepreneurship and Innovation, Luleå University of Technology
AGENDA About us
What is digital business model innovation and why is it important?
3 traps in digitalization
5 lessons for digital business model innovation
Key takeaways
ABOUT USVinit ParidaProfessor
David SjödinAssociate Professor
Research Interests Servitization and advanced service innovation Business model innovation Digitalization of industrial ecosystems Open innovation and managing collaborative innovation projects Circular economy and sustainable industry
Research Funding
Research Outputs
200~ Academic Publications 30~ Industry Publications
Vinnova, Formas, Kampard Family Foundation, Ragnar Söderbergsfoundation, EU Comminsion, Handelsbanken foundation, Norwegian Research Council, Tekes
News and blogs
RESEARCH BACKGROUND • 200 plus interviews during last 3 years on the topic of digital business model innovation in B2B setting
(Sweden and globally) • Leading a team with national and international researchers through multi-years industry research
projects in Sweden • Involving numerous companies from mining, forestry, construction, manufacturing, telecom, transportation, and maritime industrial
ecosystems
Industrial ecosystem
NEW LOGIC FOR DIGITAL BUSINESS MODELSustainable Industry Digitalization
as Enabler Business Model Innovation
Industrial Ecosystem
WHAT IS DIGITALIZATION?
““The use of digital technologies to change a business model and provide new revenue and value-producing opportunities in industrial ecosystem”
(Gartner report 2015; Parida, Sjödin and Reim, 2019)
Enabling digital technologies
Internet of things
Automation
Remote monitoring
Predictive maintenance
Artificiell intelligens
Smart contracts
Big Data
Cloud analytics
Digitala avancerade tjänster
…
Sensor collectinga multitude of
operational data
Connectivityenables effective
sharing ofinformation across units
Analytics, optimization and cloud solutions
enables increasedknowledge
A digital transformation
Parida, V.; Sjödin, D.; Reim, W. Reviewing Literature on Digitalization, Business Model Innovation, and Sustainable Industry: Past Achievements and Future Promises. Sustainability 2019, 11, 391.
EXAMPLES OF DIGITAL SOLUTIONS
Site management solution
Fleet management solution Preventive maintenance contract
Life Cycle Services/Cost-per-ton contract
Autonomous mining equipment solution
Portfolio of digital solution
Digital platform solution
WHAT IS A BUSINESS MODEL?
A business model define the ways an organization creates, delivers and captures value Osterwalder and Pigneur (2010)
A powerful business model ensures that all elements work together
Create
CaptureDeliverCapabilities?
Activities?Strategic Partners?
Offering?Customer need?Unique Benefit?
Revenue model?Cost Structure?
Risk management?
Valuefor a customer
Profitability
WHAT?
HOW? WHY?
HYPOTHETICAL CASE FOR ECOSYSTEM BUSINESS MODELLING
3 TRAPS IN DIGITALIZATION
1. TOO SLOW DIGITAL TRANSFORMATION
72% of global CEOs believe the next 3 years will be more critical for their industry than the last 50 years
Forbes Insights, CEO Outlook
The largest risk with digitalization is to do nothing…
Concrete actions are needed…."It's like we are waiting for someone to take the baton and come up with a holistic solution"
2. DEVELOPMENT OF DIGITAL SOLUTIONS WITHOUT UNDERSTANDING CUSTOMER VALUE
”..I am sure that their system is highly advanced with a lot of functionalities. But what I want to see is how does these functionalities apply to our business and how will it make it more profitable… and that they have not been able to achieve.” (Dissapointed customer)
Too much technology, too little business…• Engineers are often too enthusiastic in solving technological problems • Challenge to understand the specific customer or end-users needs • Often lacking in ability to critically evaluate what customer is willing to pay for.
3. SELLING DIGITAL SOLUTIONS WITHOUT UNDERSTANDING BUSINESS MODEL CONSEQUENCES
Companies often fail to fully consider the business model implications of digital customer opportunities.
Hidden and unexpects costs :Changed customer behaviors?
New (costly) delivery processes?
Operation and maintenance over multiple years?
Cannibalization of existing business model?
5 LESSONS FOR DIGITAL BUSINESS MODEL INNOVATION
1. PEOPLE DRIVES CHANGE
Lenka, S., Parida, V., Sjödin, D. R., & Wincent, J. (2018). Exploring the microfoundations of servitization: How individual actions overcome organizational resistance. Journal of Business Research, 88, 328-336.
Automation
Digitalization
Electrification
Servitization
Technological + Business Shifts
Bootlegging -Working
covertly and without
authorization
Evangelizing –Preaching
awareness and convincing
others
Collaborating -Using collegial
or legal authority to overcome obstacles
Leveraging –Capitalizing on
existing resources
How doesindividualscope with
organizationalresistance?
Creating opportunities for innovation and organizationalresistance
Bussines modelinnovation
2. ASSESS DIGITAL OPPORTUNITIES
Digital business model innovation opportunities Existing business models
GO / NO-GO for the new business model
New business model
1 2 3
Sundén, L., Parida, V. and Sjödin, D.R. ‘Exploiting digitalization opportunities through business models: Empirical insights from leading Swedish manufacturing companies’ Servitization Spring Conference 2018, Copenhagen, Denmark.
3. INNOVATE THROUGH MICRO SERVICE APPROACH
1. Identify main dilemmas - Inadequate weight at loading (+/- 10%)- Inadequate CO2 reporting- Avoid traffic issues at loading site- Optimal pace at loading - Lacking information on daily disturbances on
machine/truck/dumper- Inadequate data quality from the loaders/transporters- Lacking traceability on unloaded material
2. Selecting dilemmas - High business communication possibility- Quick turnaround time with solution and effect- Building on internal competences (predominantly)
3. Developing and implementing the solution 4. Next rounds of identifying main dilemmas and co-development (aiming for a more complex problem)
4. LEVERAGE DIGITAL PLATFORMS IN VALUE DELIVERY
Offeringdevelopment
Offeringconfiguration
Offeringdelivery
Back-end Platform orchestrator
Front-endOffering builder
Information module (core)
Product module
Service module
Service module
Implementing digital plattform architecture
Leveraging digital platforms for global sales and delivery of advanced services
Ensuring profitable service delivery towards
customers
Customer service processes for Operational
efficiency Customization
Developing applications for analyzing customer usage data for delivery support
Identifying & sharing best practices for processes, activities, and resources among front-end units
Utilizing platform for optimizing internal delivery processes and activities for
resource efficiency
Monitoring usage data to improve customers’ operations
and decrease lifecycle costs
Cenamor, J., Sjödin, D. R., & Parida, V. (2017). Adopting a platform approach in servitization: Leveraging the value of digitalization. International Journal of Production Economics, 192, 54-65.
5. USE CONTRACTING TO ALIGN PARTNER INCENTIVES
Focus on results, not singletransactions
Clearly defined and measurable desired
outcomes
Focus on what,not how
Pricing model withincentives optimizing the
business
Governance structurecreating insight rather than
oversight
3
5
42
1
Lower cost for customer
Better business for supplier
Higher quality/innovation for customer
Relational Contracting
What’s In It For We?
KEY TAKEAWAY Digitalization is more than developing new technology. A successful implementation requires complex interactions between technology, processes, people and business models both within the company and externally in the ecosystem.
Business Model
Innovation
Technology
People
Partners
Processes
Digitalization opportunities Successful digitalization• Increased value creation • New revenue streams• Efficient processes• Profitable relationships• Sustainable benefits • Societal benefits
Start looking for opportunities and involve your ecosystem partners……
THANK YOU!For more information about DigIn contact:
Vinit Parida [email protected] +46735435074David Sjödin [email protected] +46730463206
WORKSHOP ECOSYSTEM BUSINESS MODELING
- Digitialization offers many opportunities for business model innovation… but it requires more involvement of ecosystem partners… and this is not easy
- Key challenges for digital business model innovation in ecosystems:1. How to create vaule among multiple actors?2. How to ensure value delivery in complex ecosystems?3. How to ensure fair value capturing among multiple actors?
Workshop task group discussion: - How can companies adress these challenges? Pick one or two and discuss.
Can you think of any solutions, best practices or sucess stories?- Discuss 30 minutes in groups- Write down notes & be prepared to present key insights when we come back)
1Examining business opportunities and challenges with digitalization and new business models
DIGIN RESEARCH COLLABORATION
1
Capability development and investigation of partnering opportunities within ecosystem2
3Supporting business model innovation activitiesand ecosystem collaboration towards commercialization3
To support digital business model innovation in Swedish industrial ecosystemsProject application for Vinnova stage 3 in progress
Automation
Digitalization
Electrification
Servitization
Technological + Business Shiftsin Industrial Ecosystems
Bussines ModelInnovation
in Industrial Ecosystem